Signing on the dotted line, and what follows

April 28, 2008

In early March, what caused CNBC’s Jim Cramer to rave about an investment opportunity that Wall Street had not yet noticed? Three weeks ago, why did The New York Times quote farmers and have a dateline of Hughesville, Pennsylvania? Last Sunday, what did CBS News believe to be so important in Pennsylvania, that it devoted a segment to its nightly program? Barack? Hillary? No, and though the State’s political landscape has received media coverage ad nauseam, there is something going on that has caused the national media to look hard at Pennsylvania, and seemingly overnight. Something that could have more impact on the State than any political campaign, and it’s called Marcellus Shale.

For some of you, you know all too well what Marcellus Shale means. For others, you may not be familiar with the term, but you probably have heard about the natural gas sitting under a good part of the State with Clinton County smack in the middle. That is the Marcellus Shale gas reserve.

As of late, the Marcellus Shale deposit is causing a great deal of uproar in the area. For over two years, representatives from gas exploration companies or consultants have hop scotched around the region in an effort to tie up as much ground and mineral rights as possible through acquisitions or leases.

Once considered of limited value, the black, gas bearing shale looks pretty ripe for exploration as the energy crisis in the U.S. teeters on the verge of critical mass. Rising energy prices and a new drilling technology drives the speculation on how much gas this huge deposit of shale could give up. The speculation has fueled what the media calls the “Pennsylvania Gas Rush”. The New York Times has exclaimed, “There’s Gas in Those Hills!”

Though still far from the wild and wooly madness of the 1849 California Gold Rush, there have been local, isolated cases of frenzy the last few months as landowners negotiate and dicker the terms of the leases.

Starting late winter, the competition for leasing rights intensified between companies. The price per acre has soared, and royalties have increased, along with other options that were not offered as recently as six months ago. Some property owners have signed on with a company; others have not and hold out. Still, others have yet to be approached. One thing is for sure – it has and will change individual lives. Some people are going to get very rich, others will make a modest cushion with a few creature comforts, and others will not see any direct monetary gains. So goes the rush for gas and gold.

For those of you who have “some ground” and have not signed a lease or have not been approached, Penn State Cooperative Extension in Clinton County is coordinating a two-part workshop, “Fundamentals of Natural Gas Exploration and Leasing” on April 29 and May 7 at the Dunnstown Fire Company from 7 to 9:30 p.m.

Spearheaded by Cooperative Extension in Lycoming County, the educational sessions bring together experts who can provide the needed information for someone to balance the pros and cons before they sign on the dotted line. The cost for the program is $15 per person and per session to cover our costs. Those who attend will come away armed with ample information to take the next step.

Even as this letter goes to print, Penn State Cooperative Extension is creating other teams to spread out across the State, not just to address the leasing issues, but to prepare our citizens and leaders for what the possible tremendous wealth and all its trappings can bring.

There is a possibility that the Marcellus Shale may not meet expectations, but if it produces as some experts project, then the value of gas beneath Pennsylvania could approach $500 billion. It will no longer just affect the individual landowner.

Instead, this historical event becomes a Tsunami that rolls over all our lives and our communities with economic, social and environmental repercussions of the like we have never seen since lumber was king. The question is will it be for better or for worse?

For example, what will be the impact on local roads? Drilling operations require a water and sand mix to fracture the rock to access the gas. According to a summary report from Denton County, Texas, the impact of drilling proved challenging on local services.

“Each drilling site requires approximately 364 trips to haul water to the site (if at the legal weight of 80,000 lbs.) This would be the equivalent of 3,494,400 car trips.”

How will a township work such an impact into its maintenance budget?

In a recent discussion, Tim Kelsey, state program leader for Cooperative Extension, best described what is happening with the Marcellus Shale event.

“Natural gas is not simply a leasing issue, but now is expanding to include the industry's potential impact on local roads and infrastructure; local emergency services; local employment; local businesses (how well will they be able to 'capture' new found wealth, or will it be spent outside the community?); estate and financial planning for the newly wealthy; philanthropy; environment and viewsheds; entrepreneurship and business development; main streets; land use and land use planning; etc. This is much broader than just individual landowners, but includes educational needs for local government officials, businesses, schools, non-profit groups, citizens, and others.”

Though the current atmosphere revolving around gas leases is heady, and from the conversations I have had with some landowners, it can be intoxicating; it will settle down.

Then what? The possibilities and scenarios are many. Rest assured, as the gas industry exploration evolves, there will be a wave of change followed by another, then another. Along with historic opportunities come considerable challenges.

To help our communities make the most of the opportunities and address the challenges, Penn State Cooperative Extension is there leading with educational programs every step of the way.

If you are interested in the gas leasing programs contact us at 570-726-0022 or http://clinton.extension.psu.edu if you have concerns or interests about the impact of the natural gas issue, feel free to contact us to be part of the dialogue as we move forward.

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Don Woodring is Extension Educator of Economic and Community Development at the Clinton County Resource and Education Center in Mill Hall. He can be reached at 570-726-0022 or daw45@psu.edu